Oral Care Players Are Vying For Share In India’s Toothpaste Market

by Trefis Team
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Competition in India’s toothpaste market has been heating up in the last few months. Procter & Gamble (NYSE:PG) recently entered the market with the launch of Oral-B Pro-Health, a specially formulated toothpaste for Indians that contains a patented ingredient. [1] Meanwhile, Unilever (NYSE:UL) has been taking on the the market leader Colgate by airing comparative advertisements on Indian television, claiming that its Pepsodent Germicheck toothpaste is 130% better than Colgate. [2] Although Colgate-Palmolive (NYSE:CL) has already taken Unilever twice to court, its plea to restrain the latter from resorting to comparative advertising has been declined both times as the court didn’t believe that the ad denigrates Colgate’s toothpaste. [3]

In this article, we talk about the growth opportunity in India’s oral care market, particularly for toothpastes, and analyze how Procter & Gamble, Unilever and Colgate-Palmolive are targeting this market opportunity.

What Is Attracting Oral Care Companies To India?

The global oral care market is sized at approximately $30 billion. [4] India accounts for 5% of the global market which values the country’s oral care market at about $1.5 billion. The Indian oral care market has grown by low-double digits to high-teens in the last few years. It registered annual growth of 13% during March 2012–2013, while the global market grew by only 3% during the same period. With a 17% simultaneous increase, the toothpaste segment is witnessing the fastest growth.

On the back of increasing oral hygiene awareness, improving discretionary income and high advertising expenditure by oral care companies, India’s oral care market is forecast to grow at a CAGR of 14% in the next three to four years. This is much higher than the 3% CAGR forecast for the global market. The expected high growth rate in India presents an opportunity for oral care players to offset the impact of lower growth rates in developed countries.

The toothpaste segment is particularly attractive to these players. It accounts for over 70% of the total value of the oral care market in the country. The penetration level of toothpastes in India (55%) is low, as toothpaste usage in rural India is still very limited. Also, the per capita toothpaste consumption in India (127gm/year) is one of the lowest in the world. These factors allow room for extensive growth in oral care. [5]

Key Trends Fueling Growth In India’s Toothpaste Market?

1. Rising demand from rural India: Although only 42% of the people living in India’s villages and small towns use toothpastes, the proportion is increasing with rising rural income and greater awareness about oral hygiene through advertisements, dental camps and free dental checkups. [6]

2. Rife oral hygiene problems: More than 30% of India’s population suffers from gum sensitivity and oral hygiene problems. Thus, India’s urban population is continuously upgrading from regular to functional toothpastes due to which the category is growing by 30%–40% annually.

Recent Strategies Being Pursued By P&G, Unilever and Colgate-Palmolive

1. Procter & Gamble

Despite high growth in India’s oral care industry, P&G has not been able to build a significant presence in the market. Until 2012, the company was present in India’s toothbrush segment only, which constitutes less than 20% of the oral care market in the country. Although P&G was expected to launch its first toothpaste in India in 2010, the company’s increased focus on core developed markets caused delay. P&G finally entered the toothpaste segment in July 2013 with the launch of Oral-B Pro-Health. The company managed to get only 0.2% share in toothpastes in its first month.

P&G launched the Smile India campaign and signed up famous Indian actress, Madhuri Dixit, to endorse the Oral-B brand and drive sales of the new toothpaste. [7] P&G’s products are renowned worldwide for their functional properties. Hence, the company is focusing more on selling the product in urban areas, where consumers are trading up from regular to functional toothpastes. [8]

2. Unilever

Unilever has been present in India’s toothpaste market since 1994. It sells toothpastes under the two brands, Close-up and Pepsodent. Unilever has long been trying to grow its share in the category through re-launches, educative campaigns and heavy offline advertising. However, the strategy hasn’t proved to be successful. [9] Its share of toothpastes has rather reduced from over 26% in 2010 to 22% presently. The company is now taking the comparative advertising route to steal market share from Colgate.

3. Colgate-Palmolive

Colgate-Palmolive is the market leader in toothpastes in India. The company had a share of slightly over 50% in 2010. Since then, it has maintained its distribution strength and increased the frequency of innovative product launches, especially in the functional toothpaste category, helping it in taking advantage of P&G’s delay in launching its first toothpaste. To support its products in the wake of rising competition from Unilever and P&G, the company also increased its advertising and promotional spend by 31% in the first half of 2013. These factors have resulted in market share gains for Colgate in toothpastes, which now stands at 56%.

Trefis Analysis: Colgate has strong brand recognition in India. The Colgate brand is almost synonymous with toothpaste in the country. Touching almost 4.5 million outlets, the company also has the highest reach among all consumer products companies in India. [10]  While P&G and Unilever are more focused on selling their toothpastes in urban cities, Colgate’s approach is skewed towards rural areas, where rising awareness about oral hygiene is driving strong growth in oral care. Despite this, the company has an influential presence in urban India. With over 10 extensions to the Colgate Sensitive brand, the company is also well positioned to compete with P&G and Unilever in the sensitive toothpaste category, which is experiencing rapid growth in urban cities. [11]

Additionally, Colgate-Palmolive derives about 45% of its revenues from the oral care division while P&G and Unilever earn less than 5% of revenues from oral care products. The strategic importance of oral care for Colgate is likely to help the division attract more resources and investments from the company to maintain its strength in the markets.

Although we expect Colgate to concede some of its market share in toothpastes to P&G and Unilever, we also believe that the two companies will not be able to steal Colgate’s dominance. Colgate will continue to be the market leader in India; however, this will come at the cost of higher advertising and promotional expenditure.

Our price estimate of $40 for Unilever is almost in line with the current market price.

Our price estimate of $74 for Procter & Gamble is at a discount of over 5% to the current market price.

Our price estimate of $56 for Colgate-Palmolive is at a discount of 5% to the current market price.

Notes:
  1. P&G enters Indian toothpaste market with Oral-B Pro-Health, The Economic Times, July 2013 []
  2. Ad war: HUL’s Pepsodent ‘Germicheck’ toothpaste takes on market leader Colgate, The Economic Times, August 2013 []
  3. Colgate suffers setback in ad war with Hindustan Unilever, The Financial Express, September 2013 []
  4. Oral Hygiene: Global Industry Guide, MarketLine, Report Linker, August 2013 []
  5. Future Prospect of Indian Oral Care Industry, Sana Securities, January 2013 []
  6. Indian Oral Care Market Forecast to 2015, Research and Markets, June 2012 []
  7. P&G to join toothpaste wars with Oral-B rollout in India, Business Standard, May 2013 []
  8. P&G Invokes Bollywood in India Toothpaste Battle, Bloomberg, July 2013 []
  9. Oral care market growing on rising per capita consumption and premiumization, The Times Of India, October 2012 []
  10. India’s Top Consumer Brands, Kantar Worldpanel, May 2013 []
  11. P&G Invokes Bollywood in India Toothpaste Battle, Bloomberg, Juy 2013 []
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